March 4 (Bloomberg) -- Bank Leumi Le-Israel Ltd. dropped to
the lowest level in a month after the country’s largest lender
by assets said it would post a fourth-quarter loss as it makes a
provision to cover costs related to a U.S. tax probe.

The shares retreated 1.9 percent to 12.91 shekels, the
lowest level since Feb. 6, at the close in Tel Aviv. The TA-25
benchmark stock index slid 0.2 percent. Leumi has the fourth-largest weighting on the gauge.

The Tel Aviv Banking Index, which measures the performance
of Israel’s five largest commercial banks, dropped 0.4 percent.
Leumi said today it would take a 340 million shekels ($91
million) provision to cover costs related to an investigation by
U.S. authorities connected to suspected clients’ tax evasion.
Final expenses may be significantly higher, the bank said in an
e-mailed statement. The bank said it expects to post a fourth-quarter loss of 100 million shekels including the special
provision.

“Leumi may be required to provision additional sums
covering these investigations as U.S. authorities tend to be
very harsh with their level of fines,” Terence Klingman, head
of trading at Psagot Investment House Ltd., said today by phone.

No Admission

The provisions are not an admission to any claim that can
be made against the group by U.S. authorities, the bank said in
today’s statement.

Dozens of U.S. citizens who used offshore accounts to avoid
taxes have helped the federal government in a criminal
investigation of two Israeli banks, Leumi and Mizrahi Tefahot
Bank Ltd., two people familiar with the matter said last month.
The probe comes amid a U.S. crackdown on offshore tax evasion
that has widened since UBS AG, the largest Swiss bank, avoided
prosecution in February 2009.

Zurich-based UBS, which paid $780 million, said it helped
clients evade taxes, and later turned over data on thousands of
accounts. Since then, at least 11 banks have been the subject of
U.S. criminal investigators, including Mizrahi; Leumi; and
Credit Suisse AG, the second-largest Swiss bank.

Mizrahi shares fell 0.6 percent to 38.37 shekels. When
asked if the bank will also announce a provision because
of the investigation Benny Shoukron, a spokesman for Mizrahi,
said “no.”